Opel to focus on smaller cars with more techs from parent GM

Article by Andrew Christian, on June 9, 2014

Opel is targeting to return to profit and hike its market share in Europe by concentrating on smaller cars that features more components from General Motors, according to chief executive Karl-Thomas Neumann said. Opel-Vauxhall targets to become the second largest carmaker in Europe by 2022, aiming to hike its market share in the region to 8 percent.

That goal should be reached by introducing 27 new models and 17 new engines between 2014 and 2018 – all featuring more technologies from parent GM. Neumann remarked that Opel needs to use a global platform to be really profitable, since such will pave way to achieving economies of scale in the auto business.

Opel and its profits has been hurt by management disruption, lack of small car offerings as well as the conflict between GM's goal of global economies of scale and Opel's stress on catering to the local market. In April 2013, GM vowed a EUR4-billion ($5.2 billion) investment in Opel by the end of 2016 to support the development of new cars – as part of its bid to connect the Opel and Buick product ranges to share development costs.

GM will focus on selling Opel units in Europe, and Buick vehicles in the United States and China. The CEO is aiming to bring Opel back to black by 2016 at the latest and post an operating return on sales to 5 percent by 2022.

He expressed confidence that Opel will be able to stop its financial bleeding by 2016. The carmaker has been losing money in Europe for more than a decade, but has managed to reduce them by more than half last year.

Opel expects to post one-time costs like the closure of the Bochum site and volatile currency headwinds for 2014, Neumann remarked, adding that a severance agreement terms for Bochum employees is expected in mid-June.

Opel is closing its Bochum site as part of plans to return to profit by 2016. According to Neumann, the plans for restoring profitability by 2016 will be boosted by increased capacity utilization, higher sales revenue and lower product and structural costs.

Topics: opel, gm, small car

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